Global Business Strategy Assessments
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The implementation of international strategy is extremely necessary for every business organisation which is operating in the global market. The following business report investigates the diverse theories of internationalisation applied by Tesco Plc and analyses the theories according to the company’s values and objectives (Oh et al., 2019). In order to expand its market among various countries, Tesco has to utilise some key strategies which have been demonstrated in this study briefly. Apart from that, the foremost intention of the study is to focus on how Tesco has established its market in the Asian marketplace specifically in Ireland.
2. Strategic Overview of the Company, Identifying the Key Strategic Decisions since the start of its Internationalisation Process
Selecting the appropriate internationalisation strategy is difficult as each country contains cultural diversity and its own beliefs. In the case of Tesco Plc, the company has started its first international expansion in 2008 by opening a store in Hungary. However, these following countries including Taiwan, Northern Ireland, the Czech Republic, Slovakia, Poland, Thailand the Republic of Ireland, and South Korea also connected to the global expansion of Tesco (Son et al., 2018). As a matter of fact, Tesco now serves almost twelve international markets along with the entire region of the United Kingdom.
Tesco penetrates in the foreign marketplace through utilizing various internalisation processes but the primitive strategy is to create joint ventures with acquisitions, local firms, and Greenfield investments. The primal intention of the company is to focus on the market leader of the foreign country and then penetrates the market within a phase of five years (Samdani, 2020). The company has recorded enormous accomplishments in multiple European countries along with Asia but in the case of America, the situation was hard to tackle. However, the success of Tesco in the foreign market has been sustained through the sensitivity of the neighboring culture of the market atmosphere and host countries.
3. Critical Analysis of the Internationalisation Strategy, Identifying the Model/s used during the Expansion Strategy and the Key Capabilities used to Support it:
Tesco Plc International Strategy
The importance of applying absolute foreign expansion strategy is exceedingly significant to understand the criteria of financial status, organisational structure, and corporate culture for Tesco in the global market. However, the internationalisation procedures of Tesco have mainly been done by mergers, partnerships, and acquisitions. As a matter of fact, utilizing acquisitions as internalisation strategy has made effortless for the company to provide the local market according to their basic need (Samdani, 2020).
Tesco decided to enter the Irish food retail market by purchasing entire Crazy Prices, Quinnsworth, and Stewart’s stores in the Country. However, it was too risky to enter the marketplace of Ireland as it leads to enormous costs and necessities of exceeding amount of commitment. In spite of having these risks, the company has successfully established its appearance in the Irish market (Wood, Wrigley, and Coe, 2017). As a matter of fact, this entrance mode has been proved to be accommodating for the suppliers of Ireland. It refers to expanding the admission of Tesco to an already recognised delivery channel. It is indeed necessary for identifying the marketing environment o0f Ireland for Tesco through acquisitions policy. The most concerning part related to the Irish customers is that they are predominantly responsive to change and loyal to the brand that they are used to (Robson, and Pitt, 2018). Thus, the entrance strategy of Tesco in the Irish market has been proved to be quite different from other foreign expansion strategies.
Having loyal customers for a longer period of time could become beneficial for every company to expand in the international market. Probably, it is the primal reason for Tesco to enter the marketplace of Ireland through the acquisitions of Irish stores (Hemvichitr, 2018). The company has made numerous achievements and become profitable for getting such loyal consumers by implementing an exceptional foreign strategy in the marketplace of Ireland. As a matter of fact, the modes of entrance such as exporting would have intended that the company could not manufacture nearby. However, Tesco has been considered as a highly regarded company and it is essential that the company has inclusive control over its business enterprises. As a result, the chances of causing problematic situations regarding this process are low (Robson, and Pitt, 2018). Therefore, in the case of expanding in the Irish market franchising, licensing and ventures would not be preferable modes of entrance.
The suggestion of the Irish government towards Tesco demonstrates that the company must accept the contracts with the local suppliers. The impact of the participation of the Irish government in the internationalisation procedure of Ireland has been proved to be accommodating as the emergence of Tesco has made huge economic expansion for the government of Ireland (Wood, Wrigley and Coe, 2017). As a consequence, the company gets benefited by these suitable actions taken by the Irish government and also the company has increased admission to cheaper labour as well as contributing towards it being renowned as a domestic company by the customers. Thus, implementing acquisitions as an international expansion strategy has become helpful in developing the business in the marketplace of Ireland.
Identifying the Model Utilised During International Strategy: Acquisition Theory
In this paragraph, there will be a discussion of international expansion entry modes specifically on acquisitions, and how Tesco has been proved too advantageous for Tesco to implement as a tool in the Irish marketplace (Nguyen and Phan, 2017).
The criteria of acquisitions refer to a transaction’s procedure in which a firm gains control over a different firm through purchasing its stock, switching the stock for its own purpose. According to the criteria of a private firm, the process is to pay the owners an acquiring price. The implementation of acquisitions as an international expansion entry mode has been increasing day by day because it can provide the company rapidly, recognised access to an indefinite market. However, the superior interest rates in rising countries have reinforced their currencies comparative to the dollar or euro. In that case, if the acquiring firm is in a country with a tough currency, the acquisitions are moderately cheaper to build (Hemvichitr, 2018).
In order to utilise an acquisition strategy; there have to be exploring methods to identify certain regulations in the target market. As an example, China has multiple restrictions related to foreign ownership but in the case of enlarged world nations such as the United States has regulations addressing acquisitions (Chilombo, Fisher and van 2019). In the case of Tesco, the very first attempt has not been successful as the acquisitions of comparatively small supermarket chains in the country and were deprived shortly after acquisition. However, the company has adopted the latest modification by deciding on the acquisition strategy that the company will acquire larger foreign firms rather than smaller firms. The company ventured into the Irish market again and this time the company gain huge profitability and success by targeting the Irish food retail market (Nguyen and Phan, 2017). The primal intention of Tesco is to develop a superior shopping culture to create a better relationship with the consumers and thus it is very much effortless to implement acquisitions rather than any other strategies for internationalisation.
Primal Abilities Utilised to Support Acquisitions
The primal abilities used by Tesco in the marketplace of Ireland to support acquisitions are as follows;
- Exploit A Business’s Industry-Specific Scalability: Economies of scale are often considered as a primal source of value creation in M&A. the company needs to be very cautious in mitigating an acquisition by economies of scale, specifically for large acquisitions (Hemvichitr, 2018).
Economies of scale can be significant sources often found in purchasing, especially in the case of very few numbers of buyers. Tesco has determined to penetrate the Irish food retail market through purchasing entire Crazy Prices, Quinnsworth, and Stewart's stores in the Country (Chilombo, Fisher, and van 2019). It has proved to be significant for understanding the entire market effortlessly.
- Pick Winners Early and Help Them Develop Their Businesses: The primal winning strategy is to make acquisitions earlier in the life cycle of a new industry or product line. Tesco has decided to enter the retail food market of Ireland to establish itself. as a matter of fact, the attempt was successful to enter the foreign marketplace through implementing a rightful strategy for internalisation (Nguyen and Phan, 2017).
Tesco Ireland is part of the Tesco PLC global network of companies. Tesco was established in the United Kingdom in 1920 and has been a low-cost store ever since.When the company bought a small 51 percent interest in 3 Guys in 1978, it moved to the Republic of Ireland and finally left the company in 1986 (Fadeyi, 2020). Tesco has been expanding worldwide since 1994, in countries such as Poland, Czech and Slovak Republics, and Hungary, in 1995/96. By 1999, it had built a global network of outlets, including 91 in France, 75 in Ireland, 17 in Thailand, and two in South Korea, all of which were in central European countries. Following the acquisition of Associated British Foods’ food retailing interests in Ireland, Tesco returned to the Irish market in March 1997 (Alexander, 2020). This purchase provided them with national representation in both halves of the island, as well as immediate market domination. The company promised to invest 100,000 kg in the store’s renovation and expansion when it was accepted. Once the operation ended in 2001, the ‘Quinnsworth’ / ‘Crazy price’ stores were restocked on a site-by-site basis. All of the grocery stores acquired were medium to big supermarkets with distribution areas of fewer than 25,000 square feet, with sales areas ranging from 40,000 square feet in certain cases (Samdani, 2020). The shop network was nationwide, with a good mix of urban and rural areas.
In the wake of the Tesco partnership with the Irish Government, it committed to purchase items from Irish producers and to give Irish goods with access to Tesco stores, among other things. The organisation also worked with Irish farmers and processors to promote manufacturing in the industry. More than 90 Tesco Ireland-branded items were manufactured in the first year of the firm in Ireland. For Tesco’s branded suppliers, ‘Quinnsworth’ /’Crazy Luxury Preference’ providers paid £11 million. Sellers with one-off or unique product lines have been allowed to supply locations throughout the Tesco network (Regan and Kneafsey, 2020). In early 2002, 119 Irish firms manufactured Tesco brand items for home and international markets. Non-food products, such as clothes, cell phones and gadgets, music, and films, were added to chosen stores with acceptable scale. It sought for additional storage locations and upgraded all previously purchased enterprises. The goal was to bring all Irish retail outlets’ architecture, goods, and equipment, as well as the entire ambience, into line. It has spent more than €300 million on expanding its shop to this point. The firm launched a ‘employee awareness’ campaign in February 1998, during which 8000 of its Irish workers spent at least one day in the United Kingdom on various shopping trips (O’Donoghue et al., 2018). In all Irish sites, they’ve started a management twinning programme with a similar UK retailer.
Tesco launched the Irish Clubcard very shortly after it arrived, and it already has 700,000 subscribers. The company created advanced data mining software in the United Kingdom that allowed for analysis of Clubcard sales by country, merchant, product line, or client type. Customers have benefited directly from this information, which has been used for advertising purposes. Clubcard now has five members: ESAT Transparent, ESAT Digifone, ESAT Transparent, and ESAT Transparent (Pham et al., N.D.). Clubcard also works with five more organisations. Tesco’s fruit and vegetable distribution was integrated in 1998. Keelings, a Dublin-based company, was honoured for its contributions to Tesco’s 78 stores. All buying decisions of the firm were taken in Dublin.
In May 1999, Tesco bought a 35-acre storage facility in North Dublin. The warehouse is used as a distribution centre for Tesco’s new chilled and frozen food distribution service throughout Ireland. The ‘Keelings’ unit was awarded the production contract later that year (September). This repository includes two thirds of the goods of Tesco Ireland by volume, however Shelflife estimates that 50% of all lines are still not centrally available. It then formed a subsidiary firm (Allegro) to promote the goods that weren’t loaded with food and were moving slowly. Tesco store layouts are created to meet the needs of our diverse client base. It also gives them the flexibility they need to satisfy the new planning policy’s requirements. When building new stores, the company addresses the specific needs of the local population, ensuring that the structure and landscape blend in with the surroundings. It can now supply smaller compact stores in previously difficult-to-serve locations because to advances in its purchasing and delivery techniques.
Tesco’s value line currently contains 1,200 products, and industrial clients account for 70% of Tesco’s customers. Its stores are customised to meet the demands of its consumers. Specifications in all of their manifestations contribute to the shopping experience. Tesco has four separate retail segments: ‘Extra’, ‘Superstore’, ‘Metro’, and ‘Express’. Each one is unmatched in terms of value.The statistical chart below depicts the grocery shop market share in Ireland for the twelve weeks ending May 16, 2021. SuperValu led the market with a 22.2 percent share, followed by Tesco with a 21.6 percent share.
Tesco employs a variety of positioning tactics to attract the target consumer group in order to retain its competitive position in the Irish market.
Tesco leverages ‘Price Positioning’to market a range of its own-brand products, including the 19-230 18.5-inch Widescreen HD Ready LCD TV. The company uses price positioning to appeal to a segment of the market that is more concerned with the price of the product or service than with the other components of the marketing mix (Smigielska and Stefanska, 2017).
‘Multi-Segment Positioning’is a strategy for simultaneously targeting many segments with a variety of goods. Tesco makes considerable use of multi-segment positioning.In addition, although ‘Tesco Technika TV’ is geared towards a budget-conscious customer segment, the supermarket chain also sells the ‘Smart Curved Wi-Fi Built-in LED TV’ with ‘Freeview HD’ to a separate consumer sector ready to pay premiums for a better-quality product (Mooney, 2019).
The growth of the range and quality of a products or service’s functions is associated with ‘Functional Positioning’. Tesco, for example, uses functional placement to promote its Tesco Finest brand of products. As a consequence, the quality of this product line acts as the key marketing platform for a certain customer segment (Rosnizamet al., 2020). Functional positioning products are frequently more expensive than those supplied via Tesco’s core range, since improved quality and usefulness can only be attained through additional expenditures.
‘Symbolic Positioning’ is interpretative in nature and is decided by the customer’s values, objectives, and aspirations. Tesco utilises this technique in conjunction with its Fair-Trade food and grocery products. Tesco also employed symbolic positioning in relation to clothing by refusing to purchase cotton cultivated in countries where child labour is used in the cotton production process. In this case, the company appeals to a customer demographic’s physiological and emotional concerns (Caprice, 2017). Tesco, in example, sells a restricted selection of Fair-Trade items at a premium price to a certain customer niche in order to satisfy their self-perception as responsible consumers.
‘Experiential Positioning’, as the name implies, is focused with giving sensory or cognitive stimulation to customers. Tesco mostly uses experience marketing to entice customers to its health and beauty products.
With the aid of the above tactics, Tesco has achieved an important position in both its local and international marketplaces. The competitive advantage of Tesco was built on low-cost retailing, high-quality items and competent customer service, all leading to profit growth. Thanks to its years of expertise and market domination in retail products and services, Tesco has a corporate image of reliability and quality for prospective consumers. They have earned a significant competitive edge in retaining market supremacy in Ireland, despite the advent of improved technology and a greater market reach from international firms.
5. Future Recommendations and the Justification
In order to make achieve further success in its international operations, Tesco needs check if its sales tactics are yielding the kind of results that it wants.With businesses facing increased competition on a daily basis, a systematically constructed sales plan is critical for effective growth in the financial performance.No matter how successful a company might be in a particular country, there is always room for further improvement in terms of its financial performance. Therefore, the following section will present a set of practical recommendations that will help Tesco to further enhance its operational competence in the international market.
- Expansion of product lines
Surviving in global business is difficult, much more so for firms that sell to consumers. Tesco’s current product portfolio may not be sufficient to support long-term growth. Smart firms re-evaluate their product lines and conduct in-depth analyses of their customers’ requirements and expectations in order to develop more effective ways to satisfy them. Enhancing client loyalty by adding new product lines, such as promotional items, to complement its present offers is a smart strategy. Tesco may choose to reconsider its product names in existing markets, as well as its business logo, product branding, and packaging, in order to ensure that every aspect of its product range communicates its fundamental business message (Paul and Criado, 2020). Additionally, expanding the product range would create new sales prospects inside the company’s present market.
- Providing additional services to existing clientele
Offering superior services in addition to current products might help a business enhance its relationship with its consumers. If prospects exist, Tesco should develop a new line of services aimed at both solving customer concerns and increasing profitability. Any service that satisfies the demands of existing or prospective consumers enables Tesco to boost revenue and strengthen client connections. The business should spend in determining what fresh, distinctive services it can provide that will generate additional leads and revenue.
- Establishing new distribution channels
International firms may encounter difficulties with product distribution. Even with established distribution channels, firms might quickly become stagnant when revenue declines significantly. If Tesco want to expand its company and improve sales, it must aggressively pursue new distribution methods. Tesco may be able to smooth out erratic purchases from its existing client base and increase income by developing a new distribution route (Gugissaet al., 2021). Adding new distribution channels not only strengthens the brand globally, but also makes it less subject to the highs and lows of its current distribution channels. To continue sales, firms must maintain a high quality of delivery or distribution.
- Identifying new client segments
Concentrating on new customer and market sectors might be critical for sustaining rapid development. The organisation should be more aware of market trends and changes in how customers engage with them and other businesses, especially rivals. The business must ascertain what additional items or services its present clientele is receiving elsewhere that it may supply (Evenett, 2019). By diversifying its client base, Tesco can increase the number of customers for existing or new product lines and services.
- Expanding market penetration in current markets
There are several reasons why firms remain confined to their present market. All company systems are in place, the staff is aware of and understands the expectations, the businesses have a firm grasp on who their consumers or clients are, and they even have a specialised market share. Given that Tesco’s business enjoys a favourable image in the market, it needs to leverage this reputation even further. It should look for other methods to expand its present market penetration and build a better basis for its business. Understanding current consumers through data analysis enables the firm to make the best decisions possible, therefore increasing productivity and fortifying its business performance and connections (Strange and Zucchella, 2017).
The bottom line is that any given company, including the multinational giants like Tesco itself should never stop seeking for new possibilities. Concentrating exclusively on strategies to boost sales will not ensure effective business growth. Businesses that wish to maintain a competitive advantage in global marketplaces must continuously seek out best practises for increasing the quality of the whole range of product and service that are offered, simplifying delivery and distribution networks, and increasing productivity, innovation, and growth.
Acquisitions and international joint ventures have been proved to be beneficial for dropping the adaptations costs, cultural barriers, and risk factors in the elevated context cultures of Tesco during the operation of internationalisation in the Irish supermarket. However, the international strategies of Tesco have been demonstrated in a critical manner and how it has been proved to be beneficial for expanding in the marketplace of Ireland through the implementation of appropriate utilisation of acquisitions. Therefore, there has been an elaboration of adding value in the host market and analysing the competitive positioning. The company will be beneficial in further future by utilizing the significant recommendations in the context.
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